December saw a continuation of strong economic data, although the Covid-19 Omicron variant was just beginning to impact the US economy. It remains to be seen just what effect the latest virus surge will have on consumer behavior and Q4 GDP numbers. Interest rates remained low throughout the month, however, and that spurred a move into risk assets.
The Unemployment Rate for November dropped to 4.2% as Nonfarm Payrolls rose by +210k (versus expectations for +550k). Average Hourly Earnings rose by +0.3% in November and +4.8% YoY while the Labor Force Participation Rate ticked up slightly to 61.8%. Initial Jobless Claims averaged 200k on the month and the latest JOLTS Job Openings survey topped 11 million.
Inflationary pressures remained persistent with both consumer and producer prices surging +0.8% in November, leading to annual increases of +6.8% for CPI and +9.6% for PPI, the highest readings in decades. The PCE Deflator climbed +0.6% on the month and +5.7% YoY. With the Fed clearly behind the inflation curve, tapering is being accelerated ahead of anticipated rate hikes late in Q1 of 2022.
The industrial complex chugged along despite employment challenges across a wide range of companies. Durable goods for October declined by -0.4%, although preliminary readings for November showed a better than expected rise of +2.5% The Markit US Manufacturing PMI came in as expected in December at 57.7, down slightly from November’s 58.3. Factory Orders for October rose by 1.0% (versus estimates of +0.5%) and ex-transportation jumped by +1.6%.
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